AUB Group Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023

14 IMPAIRMENT CONTINUED) Investments in Associates, Intangibles and Goodwill (continued) 3. Watchlist Monitoring: Entities with low headroom are monitored at Board Audit & Risk Committee (BARC) level and specifically considered during half year and year end testing given sensitivity to impairment. 4. Governance: Impairment testing is conducted by the Group financial control team in conjunction with the mergers & acquisitions team, and reviewed at 3 levels (1) Head of Financial Control, (2) Chief Financial Officer, and (3) BARC. T he Group maintains a policy to seek independent advice on multiples every 3 years from an appropriate valuations firm. The Group sought independent advice in 2022 to determine the appropriate earnings before interest and tax (EBIT) multiple used to determine fair value. T he extensive impairment testing and monitoring exceeds requirements under accounting standards and reflects the materiality of the balances to the Group and the low risk appetite of management and the BARC. Key assumptions for the fair value methodology are as follows: 2023 2022

Fair value is based on estimates of maintainable earnings. The appropriate pre-tax maintainable earnings for each CGU is multiplied by a multiple from within the range, depending on the type of business carried out by the CGU.

8-15 times 8-15 times 3.65% 2.8-3.1%

The risk free rate (before risk margin).

Multiples have been determined after factoring in the following assumed sustainable long-term profit growth.

up to 2% up to 2%

Value in use Where the Value In Use methodology produces a higher valuation than Fair Value Less Costs of Disposal (FVLCD), this valuation is used for the Recoverable Amount. This measurement takes into account the expected Discounted Cash Flows (DCF) for the next 5 -15 years based on the forecast profitability. The valuation takes into account the weighted average cost of capital (WACC) for those CGUs and also looks at the expected long term growth rate with a terminal value calculation at the end of the intermediary cash flows. This methodology will result in a better estimate valuation for entities where historic performance may not factor in the medium and long term expected growth from this business. During the current year, no CGU’s (2022: three CGU’s) were valued using the value in use methodology. All CGUs were supportable using the fair value methodology. For two of the CGUs it was determined that an EBIT multiple was not appropriate in measuring the recoverable amount for the Group in relation to the entities. The fair value measurements were categorised as level 3 fair value based on the lack of observable inputs in the valuation technique used (see Note 19). Key assumptions for the value in use methodology are as follows:

2023

2022

Post-tax discount rates (WACC).

N/A

6.5%-10.9%

Short-term revenue growth rate - used in discount cash flow assumptions (1-5 years).

N/A 2.5%-5.7%

Long-term revenue growth rate.

N/A

1.5%-2.0%

Low headroom Entities are considered to have low headroom if headroom is less than $500k or 5% of total carrying value (whichever is lower) or show impairment using any of the following: (1) Stressed multiple (2) 5% reduction in EBIT or (3) single current year profit (to ensure 3-year average does not hide a decline in profitability). No reasonably possible change in key assumptions would result in the recoverable amount of a CGU that is material to the Group’s total intangible assets, goodwill and investment in associates, being significantly less than the carrying value included in the accounts. When making an acquisition, the Group may pay a deposit and defer a component of the purchase price to be determined based on future financial results. Estimates of the final acquisition cost are made and recognised in the financial statements. An estimate of the contingent consideration is made at the time of acquisition and is reviewed and varied at balance date if estimates change or actual payments are made. This adjustment can be a loss (if increased) or a profit (if reduced). Where an estimate is reduced an offsetting adjustment (impairment) is generally made to the carrying value. During the current year, due to current market conditions further adjustments to contingent considerations in respect of current and prior year acquisitions resulted in a net reduction (previous year increase) to the estimates previously recognised by the Consolidated Group of $0.28m (2022: $0.41m). Where the revised contingent consideration estimates were below the original estimated contingent consideration payments, a corresponding and offsetting impairment charge may be recognised. The reduction in contingent consideration lead to an impairment of $nil (2022: $nil).

AUB GROUP ANNUAL REPORT 2023

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